China Can Easily Cut Off More of Australia's Commodities Exports
Comment of the Day

September 03 2020

Commentary by Eoin Treacy

China Can Easily Cut Off More of Australia's Commodities Exports

This article from Bloomberg may be of interest to subscribers. Here is a section:

Iron Ore
While the state-linked Global Times earlier this year raised the possibility that Australian iron ore supply could be targeted, it’s likely to be low on the list of possibilities. The country dominates China’s iron ore supply, accounting for more than 60% of its imports, with next-biggest supplier Brazil making up less than 20% so far this year.​

In fact, the trade is booming, with China importing a record amount of Australian iron ore in July. Still, investors will keep a close eye on any sign of tensions spilling over as even small moves to restrict the movement of Australia’s most valuable commodity -- worth about A$100 billion this fiscal year -- would send a powerful signal.

Australia has accounted for just less than half of China’s liquefied natural gas imports this year. The proportion has grown in recent years as new Australian projects came online, including two in Queensland in which Chinese oil majors are partners.

Those partnerships, along with long-term contracts that obligate Chinese buyers to purchase millions of tons of LNG a year from Australia well into the 2030s, make the trade flow a
more complicated candidate for disruption.

Eoin Treacy's view

China’s demand for commodities is likely to remain robust for the foreseeable future but that will not deter the administration from using resources as a bargaining chip in trade talks. The reality, however, is rising living standards create demand growth for products and services. If China is going to succeed in its aims of creating a modestly wealthy society for its billion plus people that is going to entail continued imports. Obviously, it is more dependent on imports for some commodities than others.

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